Messrs SHAKARGANJ MILLS LIMITED, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1519 (2007)

Customs Act (IV of 1969)---

----S.81(2), Explanation---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Finance Act (VII or 2005), Preamble---Provisional assessment of duty---Non-release of post-dated cheque being the security for provisional assessment on import of Pre-Engineered Steel Building on the ground that after the stipulated period the provisional assessment attained finality and no amount was payable as the provisional assessment included the amount of duty and taxes paid or secured as stated in explanation under S.81 of the Customs Act, 1969---Where the provisional assessment was not finalized within the prescribed period it would become final inclusive of the security---Validity---Entire reliance on the "explanation" under S.81 of the Customs Act, 1969 betrays complete disregard of the elaborate system of provisional determination of tax liability which had developed over a long period of time and a progressive formulation of the procedure had been enacted under the four subsections of S.81 of the Customs Act, 1969---Law makers and the government never intended to put a premium on the delay, inaction, indecisiveness, lack of investigation, lack of any new valuation evidence, and failure of the Collectorate and the Valuation Department to determine with substantive reasons and justification the final assessment within considerably long period of nine months, to reward the customs officers for their inefficiency, neglect and lack or will or ability to decide pending valuation/assessment cases on substantive grounds and arbitrarily deprive the importer of the security deposited in the belief that a fair decision would be taken---If the Customs Authorities wanted to include the amount of security within the ambit of duty and taxes they could have done so only with adequate evidence and passed speaking order observing the due process---Allegation of maladministration having been established, Federal Tax Ombudsman recommended that Central Board of Revenue could direct the Collector of Customs to finalize the assessment on the basis of, declaration and return the post-dated cheque to the complainants within fifteen days of the receipt of this order.

M. Mubeen Ahsan Advisor for Dealing Officer.

Muhammad Afzal Awan and Imran Iqbal for Petitioners.

Rana Tasleem, Assistant Collector of Customs PQA and Tariq Aziz, Appraising Officer Law.

FINDINGS/DECISIONS

JUSTICE (RETD.) MUNIR A. SHAIKH (FEDERAL TAX OMBUDSMAN).---The complaint has been filed against the Customs Department for not releasing post-dated cheque being the security for provisional assessment on import of Pre-engineered Steel Building under section 81 of the Customs Act. It has been stated in the complaint that when the Goods Declaration was filed on 24-11-2005 the appropriate officer of' the Collectorate of Customs Port Muhammad Bin Qasim made provisional assessment under section 81 of the Act and goods were released (on 15-12-2005) against a security of Rs.26,40,000 in a (post-dated) cheque dated 23-11-2006. The matter was referred to the Director General of Customs Valuation by the Department which was disposed of by the Deputy Director vide letter dated 24-7-2006 with the advice to approach the concerned Collectorate for further information in the matter.

2. It was stated that the Complainants approached the respondent vide letter dated 7-8-2006 for return of the post-dated cheque but received no response. It was argued that the respondent did not dispute the provisional assessment, no inquiry was made nor any speaking order for final determination or assessment was passed within the time-limit of nine months from the date of provisional assessment (15-12-2005) as provided under section 81(2) of the Act and no extension of time was granted during the period of limitation. Till the filing of the complaint on 8-1-2007 they had neither received any response about the release of the post-dated cheque nor was any formal order or reasons for its non-release communicated despite applications and reminders. It was stated that a great deal of hardship was faced by them as their company's account remained blocked on account of non-release of the post-dated cheque even after the expiry of the limitation period of nine months.

3. It was alleged that inaction on the part of the respondent came under the definition of maladministration which "includes (i) a decision, process, recommendation, act of omission or commission which (a) is contrary to law, rules and regulations", or (b) "is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory", there has been neglect, delay, incompetence, inefficiency in the administration and discharge of duties and responsibilities under section 2(3) of the Federal Tax Ombudsman Ordinance, 2000.

4. The Complainants stated that having no other adequate remedy, they had approached the office of the Federal Tax Ombudsman with the prayer that in exercise of the power conferred under the Federal Tax Ombudsman Ordinance, 2000, the lack of response to their letters, non-issuance of any formal orders z and not communicating reasons against the release of the post-dated cheque for Rs.26,40,000 be declared as maladministration. It was also requested that if the respondent had any reservation for not releasing the security relating to the aforesaid case an opportunity of hearing be given so that they might clarify their position and written intimation be given in the interest of justice.

5. The Deputy Collector Law, Port Muhammad Bin Qasim, in reply to the complaint raised preliminary objection that the matter involved interpretation of section 81 of the Customs Act which was barred under section 9(2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, and the complaint was liable to be dismissed. Another objection was that since the complaint had been filed by an unauthorized person, it was not maintainable, and also that the Complainants were not aggrieved by the assessment made by the respondent because it had been accepted by them.

6. In the parawise comments it was stated that the Valuation Department's letter, dated 24-7-2006 directing the Complainants to approach the Collectorate was wrongly interpreted being in their favour. It was stated that after the stipulated period under subsection (2) of section 81 of the Act, the provisional assessment attained finality and as such no amount was due and payable to the respondent. The provisional assessment was not challenged by the Complainants and according to section 81 of the Customs Act provisional assessment included the amount of duty and taxes paid or secured against the bank guarantee or post-dated cheque as slated in the "Explanation" under section 81 of the Customs Act.

7. It was further stated that the declared value was found very low, and the goods were released by securing the differential amount of duty and taxes in the form of a post-dated cheque. The inquiry could not be completed within the time-frame of one year and if the provisional determination could not be finalized it was laid down under section 81(4) of the Act that the provisional determination shall be deemed to be the final determination. Since the assessment was not disputed or challenged by the Complainants, they were not ' entitled for the refund of the security. It was stated that in view of section 81(4) of the Act, the respondent's action should not be declared as maladministration. Had the complainants been entitled for the refund, they should have called in question the act of the respondent. It was requested that the complaint being barred under section 9(2) of the Federal Tax Ombudsman Ordinance, 2000, filed by an unauthorized person, the act of the respondent was not covered by the definition of maladministration and the Complainants were not an aggrieved person, the complaint be dismissed.

8. During personal hearing of the complaint, the counsel for the complainants emphasized that the provisional assessment was made by the customs on the declared value and a post-dated cheque was given to the customs as security. The customs were required to finalize the assessment within nine months which was not done, no inquiry was made, no evidence of higher value was available with the customs or with the Valuation Department and consequently the provisional assessment on declared value attained finality under subsection (4) of the section 81 of the Customs Act. The learned Counsel further emphasized that the "Explanation" that "Provisional assessment means the amount of duty and taxes paid or secured against bank guarantees or post-dated cheque" did not over-ride the substantive provisions of section 81 and as far as the assessment of goods on the basis of declared value having attained finality under section 81 of the Act was concerned the explanation had no meaning or impact on assessment.

9. He argued that since the assessment was finalized on the declared value, the post-dated cheque should have been returned to the Complainants under subsection (3) of section 81 of the Customs Act. He stated that several letters dated 17-2-2006, 24-2-2006, 17-4-2006, 15-7-2006 and 30-8-2006 were written to the officers of the Department who did not reply to any letter which betrayed negligence of the assessment of goods agitated before them.

10. The Appraising Officer replied that the explanation that provisional assessment included the amount of duty and taxes paid or secured was part of the section 81 and where the provisional assessment was not finalized within the stipulated period the provisional assessment inclusive of security would be the final assessment. He admitted that before the introduction of this explanation in the Finance Act of 2005 the provisions of section 81 did mean that in case of non-finalization of assessment the provisional assessment on the basis of the importer's declaration would be final. With the addition of the Explanation the situation had drastically changed. He further stated that with regard to the complaint that the order for final assessment has not been passed, the Customs Authorities were willing to do so now to enable the Complainants to' seek redressal of their grievance, at the appropriate forum.

11. The submissions made by both the sides have been examined. This office has taken cognizance of the complaint on account of the inaction, neglect, incompetence and inefficiency of the respondent in finalizing the provisional assessment made under section 81 of the Customs Act. There was no need or occasion for any interpretation of this section and the objection of the respondent regarding the maintainability of the complaint before this office is overruled. With regard to the objection that the complaint has been filed by an unauthorized person, it has been found that the complaint has been signed by Mr. Muhammad Awais Qureshi, Executive Vice-President, who also signed an affidavit on behalf of the Shakarganj Mills Limited as well as the Vakalatnama appointing Mr. Afzal Awan, Advocate, to appear and act as their Advocate. This objection is also not valid.

12. From the facts of the case it transpires that Goods Declaration was filed on 24-11-2005 and provisional assessment under section 81 of the Customs Act was made against a security of Rs.26,40,000 in a post-dated cheque dated 23-11-2006. The respondent did not address, dispute, or question the provisional assessment, no inquiry was made for final determination and no order for final assessment was passed within the time-limit under subsection (2) of section 81 and even till the date of filing of the complaint on 8-1-2007. Complainants had not received any order from the respondent. But the post-dated cheque was also not released and formal order or reasons for non-release too were not communicated. It has been asserted that since final determination was not made within the stipulated period, the provisional assessment should be deemed to be final, the act of not releasing the post-dated cheque be declared as maladministration, and the respondent be directed to release the cheque.

13. The respondent on the other hand has taken the plea that after the stipulated period of the provisional assessment attained finality and no amount was payable to the Complainants as the provisional assessment included the amount of duty and taxes paid or secured as stated in the Explanation under section 81. This point was also emphasized by the Appraising Officer that where the provisional assessment was not finalized within the prescribed period it would become final inclusive of the security. The entire reliance on the "Explanation" under section 81 betrays complete disregard for the elaborate system of provisional determination of tax liability which has developed over a long period of time and a progressive formulation of the procedure has been enacted under the four subsections of section 81. It cannot be the intention of the law makers and the government to place a premium on the delay, inaction, indecisiveness, lack of investigation, lack of any new valuation evidence, and failure of the Collectorate and the Valuation Department to determine with substantive reasons and justification the final assessment within considerably long period of nine months, to reward the Customs Officers for their inefficiency, neglect and lack of will or ability to decide pending valuation/assessment cases on substantive grounds and arbitrarily deprive the importer of the security deposited in the belief that a fair decision would be taken. If the customs authorities wanted to include the amount of security within the ambit of duty and taxes they should have done so only with adequate evidence and passed speaking order observing the due process.

14. In view of the circumstances discussed above, the allegation of maladministration has been established. It is recommended that C.B.R. direct the Collector of Customs to

(i)finalize the assessment on the basis of declaration and return the post-dated cheque to the Complainants within fifteen days of the receipt of this order; and

(ii) compliance be reported to this office within thirty days.

C.M.A./37/FTOOrder accordingly.